Canadians slow to shop online for groceries
But expert warns retailers that competition is growing and will soon cut into market
Canadians are laggards when it comes to buying groceries online today, but that’s about to change quickly, according to speakers at the Retail Council of Canada conference on Wednesday.
“We think you should think of this as the competitor that is coming in and is going to take 10 per cent of your market,” said Randy Burt, partner, A.K. Kearny Consumer and Retail Practice at the council’s annual conference, held at the Toronto Congress Centre.
In Britain, 15 per cent of grocery sales are conducted online, in France the figure is 9 per cent. And 5 per cent of the $1-trillion grocery market in the U.S. is online.
But in Canada, online shopping for groceries comprises less than 2 per cent of $120 billion in annual grocery sales, according to Vishwa Chandra, vice-president of retail accounts at Instacart.
“In Canada we’re just getting started,” said Chandra, who estimates the market for online groceries in Canada is somewhere above 15 per cent. “The question is how quickly we get there,” he said.
Canada has been behind the curve because consumers weren’t ready for it and retailers didn’t have the infrastructure in place to offer it. Delivery was seen by most grocers as a luxury, adding cost to operations and subtracting from profits in an industry where margins are slim to begin with, said Chandra.
But that is changing. Loblaws and Walmart offer online grocery shopping, with pickup in store at some locations, and Grocery Gateway, owned by Longo’s, already provides online ordering with home delivery.
Shopping online for everything from books to clothing and televisions is now common and consumers are ready to do more of their grocery shopping online, said Chandra.
And hot on the heels of millennials is Generation Z, those born after 1996, who are digital natives, having grown up using tablets, smartphones and computers. They are entirely comfortable with technology and don’t need to master new skills to use it.
Generation Z expects that everything they need, including groceries, will be available online, Chandra said.
“Their cellphone is the hub of everything they do. If you can’t engage with them through a digital environment, you run the risk of being off their radar.”
Amazon has also made it clear it intends to compete in groceries, making it imperative for traditional grocers to get into the game in order to protect market share.
Amazon likes the grocery business because it drives shoppers to the website more frequently, said industry analyst Keith Anderson, vicepresident of strategy and insights at Profitero.
People may buy apparel seasonally and electronics annually, but they need groceries at least once or twice a week.
Amazon has already muscled into the European market, building an expansive regional distribution centre outside Munich, offering a full grocery shop to consumers, said James Bacos, managing partner of retail and consumer goods practice at Oliver Wyman Germany.
Up to half of the large grocery companies in Europe today could be gone by 2025 as a result of increased competition, Bacos said.
He said European retailers are trying to increase productivity by creating buying consortiums to reduce costs.
Walmart, meanwhile, after ramping up its grocery offering in bricksand-mortar stores is also beefing up its online grocery offering.
“We’re definitely taking a longterm view on this, this is a long-term play,” said Simon Rodrigue, senior vice-president of ecommerce at Walmart Canada.
He said Walmart wants to provide customers with online grocery shopping that is viable in the long term, and delivering groceries isn’t part of that model because the cost of delivering groceries would quickly swamp profits.
Rodrigue said Walmart Canada customers also prefer to pick up their online orders in-store because they don’t want to be sitting at home waiting for delivery and they don’t want to pay higher prices for groceries or for delivery services.
Instead, Walmart has focused on ensuring that online orders are wellexecuted, even making substitutions and paying for the difference, if necessary, in order to build the business. As a result, repeat business is phenomenal, he said.
He said adding groceries is a great way to drive business to the website.
“We really see this as an opportunity to trade at more than our fair share in the space,” Rodrigue said.
“(For Generation Z) their cellphone is the hub of everything they do. If you can’t engage with them through a digital environment, you run the risk of being off their radar.” VISHWA CHANDRA INSTACART VICE-PRESIDENT